Friday, July 24, 2009

Minimum wage

Right now I am very concerned with the unemployment numbers. About 125,000 people enter the workforce a month. These first-time employees don't make it into the unemployment rolls until they get a job, then lose it. We are at 21% unemployment, with no signs of that number turning around. the MSM would love for us to drink the "Kool-Aid of Hope" and believe that only loosing 500,000 jobs a month is improvement.

The Great depression saw unemployment rates of 25%. We are only 4 points away. But yet I am surprised at the lack of crime and lawlessness that I thought 20% unemployment would bring. Maybe it's because I have zero faith in humanity I got this wrong. Or the quality crime investigation or medical dramas that currently fill out airwaves have keep the screaming horde at docile.

I then see all over the news that the minimum wage was raised $.70 an hour. I was speechless, which for me takes a lot. This is such a colossally bad idea that I cannot come up with a euphemism to describe just how bad it is.

Let's take a look at a fictional company that assembles widgets. It has a workforce of 100 people. The workers have a fixed raise of .25 an hour every quarter for the first year. After that it's all merit based, or via promotions to line supervisor, etc. Assume for this argument that these people are not unionized.

Now this raise happens, and 50% of his workforce just got bumped .70 and hour. If I've been there 9 months, I'm only getting .15 an hour more than some noobie off of the street. The company now has about $275/hour in higher expenses from the pay raise, before they give longer term employees raises to keep thier pay in line with thier length of service. (it would be $350 an hour if they were all minimum wage, but assume some were there for 3 months.)

It's far cheaper to force overtime on people than to hire new employees. You don't need to train them, they don't earn additional vacation time or sick days. The social security and unemployment insurance the company pays per employee is saved as well. It's a no brainer.

So this fictional company fires 25 people, and makes the rest work overtime and actually makes more profit. Good job Congress, way to fuck over your green shoots!

This fictional example is based on real life. When I was in high school they raised the minimum wage and this is exactly what happened where I worked. The last thing a government needs to do is penalize small business form hiring employees. This will hamstring your economic recovery, and cripple the largest employers in America - Small Business Owners.

1 comment:

western mass. man said...

That ideaology has been prevalent in the company I work for, (and still do. just changed hands a couple times).
Getting 10 people to work 12 hours a day is cheaper than having 12 people work a 10 hour day.
My work now is looking to consolidate a few routes and lay some people off. Never mind the guy that retired last week, whom they won't replace.
It's getting nasty out there.